In the dynamic landscape of investments, achieving maximum diversification is a key strategy recommended by experts. To navigate the uncertainties of the pandemic, investor preferences have shifted towards safe and liquid options, with gold emerging as a favored choice. In India, various avenues like physical gold, sovereign gold bonds, gold ETFs, and gold funds cater to diverse investor needs. Notably, the rise of digital gold has become prominent, offering a convenient and secure way to invest online, particularly gaining traction during the COVID-19 pandemic. Digital gold, introduced by companies like Augmont, provides fractional savings and flexibility in purchasing, appealing to a broader audience.Gold ETF
Gold ETFs, on the other hand, are exchange-traded funds that track the price of physical gold in India. They operate as passive investment vehicles, traded on the BSE and NSE, providing investors with a means to buy and sell at market prices. The Gold ETF market in India has witnessed steady growth over the years, with total holdings reaching around 39 tonnes.
Gold ETFs and Digital Gold
Both Gold ETFs and Digital Gold present similarities, making them suitable for investors seeking gold exposure without the complications of physical possession. They offer transparency and real-time pricing, along with similar tax regulations. However, there are key differences worth noting.
Difference between Gold ETF and Digital Gold
- Digital gold allows for easy online purchases with minimal investment starting at Re.1, while Gold ETFs involve trading on the stock exchange through approved fund houses. Digital gold is offered by a select few companies like Augmont, MMTC-PAMP, and Digital Gold India Pvt. Ltd., whereas various Asset Management Companies (AMCs) in India operate Gold ETFs.
- KYC requirements differ, with digital gold purchases up to Rs. 2 lakh not mandating PAN or Aadhaar, making it more accessible. Ease of purchase varies, with digital gold available 24/7 through authorized partners, and Gold ETFs traded on the stock exchange during specific hours.
- Investment amounts also differ, with digital gold allowing a minimum of Re.1 and a maximum of Rs. 2 lakh without KYC, while Gold ETFs have a minimum investment of one unit, equivalent to around 1 gram of gold. Digital gold offers flexibility for conversion into physical gold or cash, a feature not available for ETF investors.
- Regulation varies, with digital gold being self-regulated, relying on selected trustees for oversight. Gold ETF, governed by SEBI Mutual Funds Regulations, undergo regular statutory audits. Digital gold has a maximum holding period of 5 years, while Gold ETF can be held indefinitely.
- Fees and charges differ, with digital gold incurring a 3% GST on purchase and additional spread, covering storage and insurance. Gold ETF involve DEMAT charges, expense ratios, and brokerage charges, totaling around 0.5-1%.
Conclusion
In summary, both Digital Gold and Gold ETFs offer distinct advantages, catering to different investor preferences and needs in the ever-evolving investment landscape.
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